Crude oil price prediction for December
- OPEC+ announced they will increase output by 500,000 barrels per day starting from January
- The previous agreement was based on 7.7 million bpd cut until March
- The first target on the upside is the 100-WMA at $48.37, followed by a critical resistance block above $50
Crude oil prices closed higher last week as the buyers are working on a bullish case. Prices received a major boost after OPEC+ finally reached an agreement on production output levels.
Fundamental analysis: Agreement reached
OPEC+, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, announced they will increase output by 500,000 barrels per day starting from January.
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This will slightly reduce the cuts to 7.2 million bpd as the previous agreement was based on 7.7 million bpd cut until March. The group was locked in talks for days before the agreement was finally reached.
“500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Paola Rodriguez Masiu, a senior oil markets analyst at Rystad Energy.
“Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.
This is the second reduction to the original 9.7 million bpd cut announced in April. The first amendment introduced a change from 9.7 million bpd to 7.7 million bpd. Media reported that this time it was UAE and Saudi Arabia that had issues and disagreements, rather than Russia and Saudi Arabia.
“Surprisingly this time, it was not a discord between Russia and Saudi Arabia that prevented the group from reaching a clear agreement on whether to delay the planned production increase,” said Ole Hansen, chief commodity strategist at Saxo Bank.
With the latest agreement, crude oil prices are likely to receive a short-term boost from the fundamental aspect going into the year-end.
Technical analysis: Major resistance broken
Crude oil prices closed 1.25% higher last week after initially falling lower to retest the broken resistance line, which now acts as support. As seen in the chart below, the price action pushed lower to touch the red line before racing higher to a bullish close.
It looks like the prices are very likely to continue heading higher in the coming days and weeks. The first target on the upside for oil traders is the 100-WMA at $48.37, followed by a critical resistance block located above the $50 handle.
OPEC+ finally agreed to new production levels that will see an increase in output by 500,000 barrels per day starting January. Crude oil prices closed higher last week as buyers eye levels above the $50 mark.